Those days of commanding heights

“A nostalgia piece written on the abolition of India’s Nehru era Planning Commission,” is how Jayanta Roy Chowdhury describes this article that appeared in The Telegraph. Chowdhury covered the Planning Commission as one of his first beats in journalism.

By Jayanta Roy Chowdhury, CJA India

An apocryphal story: Raj Krishna, the economist who coined the phrase “Hindu rate of growth”, was a member of the Planning Commission when it was formulating the Sixth Five-Year Plan. Someone asked him what the approach to the Sixth Plan would be. Krishna replied: “This is not the approach to the Sixth Plan. This is the Sixth approach to the same Plan.”

Like other relics of the Nehruvian era — smoke-belching Ambassador cars, unwieldy Murphy radio sets, urban sprawls of ugly, box-like, post-World War flats, the fashion statement of the Nehru jacket and Godrej typewriters — the Planning Commission, housed just three buildings away from Parliament, is now destined for history’s dustbin.

The body, housed in the appropriately named Yojana Bhavan (Planning House), was a warren of offices where in its heyday, economists and babus decided how many bicycles could be made in a factory, what should be the price of a bar of steel and whether a planned factory should see the light of day or not.

The concept of economic planning was borrowed from the Soviets who, in the eyes of Third World leaders, seemed to have done a wonderful job of pulling their poor, backward Russia into the 20th century.

The concept of planning — and a body that would plan for India — was first floated in 1938 by Subhas Chandra Bose as the newly elected Congress president. He decided his rival within the Congress, Jawaharlal Nehru, was the right man to be dumped with the task of dreaming up plans for India’s economic greatness.

Nehru, a Fabian socialist, was nevertheless attracted by the Soviet model of centralised planning and a command economy. In 1950, he issued an executive fiat based on a cabinet resolution setting up the powerful plan panel — an idea that appalled his finance minister John Mathai so much that he eventually chose to resign.

Old-timers say that what galled Mathai was that the body, which did not even have any constitutional authority, would usurp his powers to decide how much money he could spend for India’s development.

The first man to head the Planning Commission was Gulzari Lal Nanda, a simple, honest Congressman who later went on to be twice acting Prime Minister before breathing his last in a tiny flat atop a shop in Delhi’s Khan market.

However, the real spirit behind the Planning Commission was the statistician P.C. Mahalanobis, a personal friend of Nehru, who came up with an input-output matrix for planning or a spread-sheet method on how much capital to invest to get a required targeted rate of growth for any given industry.

Nehru and Mahalanobis’s plan model became something of a rage for development economists across the world, with many making the pilgrimage to Delhi to study the new methodology.

The Second Five-Year Plan, which Mahalanobis authored, was a remarkable success with the economy growing at 4.5 per cent. But that growth floundered soon; India’s GDP growth prior to 1991 averaged a poor 3.5 per cent and, in some years, dipped below 1 per cent.

However, with each passing year and the deepening of India’s Licence Raj, Yojana Bhavan came to be seen as politically and financially all-powerful.

Although the Prime Minister was nominally chairman of the Planning Commission, the real master of the house was the full-time deputy chairman. He had the “discretion” to distribute “plan funds” to state governments. He would decide which industry could get how much bank financing, how much machinery they could import, how many shifts they could run and even cherry-pick the industries that India ought to promote.

Sources say that an industrialist like Dhirubhai Ambani chafed over the restrictions that the Planning Commission put on the machinery imports he could make for his polyester plant in the early eighties.

Later, when Reliance Industries wanted to enter the oil and gas industry after the sector was thrown open to the private sector, the Planning Commission wanted to stymie the company’s entry by insisting that only players with proven experience could enter the sector. Reliance said the proposed restriction was too onerous and then clinched the argument by saying that if such a restriction had been in place at the turn of the century, Tata Steel might never have been able to make steel in India.

At its best, however, the commission was responsible for creating Nehru’s so-called temples of modern India — the Bhakra Nangal multi-purpose dam project, the Durgapur, Bhilai, Bokaro and Rourkela steel plants.

However, critics also point out how the same commission came up with quixotic recommendations like the one to set up a stainless steel plant at Salem in Tamil Nadu, under the influence of Mohan Kumaramangalam, without any coal or iron ore available within 1,000km of the plant. Steel made at Durgapur and Rourkela was sent by train to be melted down again to be rolled into stainless steel, a remarkable planned exercise in duplicating effort and costs.

The deputy chairman of the commission was more often than not a political stalwart —their ranks included the likes of V.T. Krishnamachari, C. Subramaniam, P.N. Haksar, Ramakrishna Hegde, P.V. Narasimha Rao, Pranab Mukherjee, Madhu Dandavate, K.C. Pant and Jaswant Singh — who could skillfully deal with chief ministers and top industrialists alike.

However, not everyone accepted the diktats of the plan panel happily. Two years ago, Tamil Nadu chief minister Jayalalithaa sarcastically told journalists: “We have come to Delhi just to be told by the commission how we should spend our own money.”

Critics also pointed to the waste and lack of monitoring by the planning body. Bridges which were to have been built under the Third Five-Year Plan were found to have remained unbuilt even after the lapse of eight more five-year plans. Panel members gave themselves a Rs 35-lakh toilet and the panel’s deputy chairman Montek Singh Ahluwalia spent a daily average of Rs 2.02 lakh during a six-month period in 2011 on foreign tours, even as the commission said that poor people could live on Rs 28 a day